Material Storage and Records | Cost Accounting - B Com PDF Download

Material Storage

Ensuring the proper storage of materials holds utmost significance. Merely acquiring materials of the desired quality is insufficient. Inadequate storage can lead to a decline in material quality, resulting in greater losses than those associated with the procurement of subpar materials. In addition to maintaining quality, the storekeeper is responsible for securely safeguarding the materials. It is the storekeeper's role to guarantee that the correct quantity of materials is consistently maintained in stock.

Duties of store keeper

These can be briefly set out as follows:
(i) General control over store: Store keeper should keep control over all activities in Stores department. He should check the quantities as mentioned in Goods received note and with the purchased materials forwarded by the receiving department and to arrange for the storage in appropriate places.

(ii) Safe custody of materials: Store keeper should ensure that all the materials are stored in a safe condition and environment required to preserve the quality of the materials.

(iii) Maintaining records: Store keeper should maintain proper record of quantity received, issued, balance in hand and transferred to/ from other stores.

(iv) Initiate purchase requisition: Store keeper should initiate purchase requisitions for the replacement of stock of all regular stores items whenever the stock level of any item of store approaches the re-order level fixed.

(v) Maintaining adequate level of stock: Store keeper should maintain adequate level of stock at all time. He/ she should take all necessary action so that production could not be interrupted due to lack of stock. Further he/ she should take immediate action for stoppage of further purchasing when the stock level approaches the maximum limit. To reserve a particular material for a specific job when so required.

(vi) Issue of materials: Store keeper should issue materials only against the material requisition slip approved by the appropriate authority. He/ she should also refer to bill of materials while issuing materials to requisitioning department.

(vii) Stock verification and reconciliation: Store keeper should verify the book balances with the actual physical stock at frequent intervals by way of internal control and check the any irregular or abnormal issues, pilferage, etc.

Store Records

The record of stores may be maintained in three forms: 

• Bin Cards
• Stock Control Cards
• Store Ledger

Bin Cards: These cards serve as a quantitative inventory record, indicating the quantity of materials present in a specific storage bin. A bin, in this context, refers to a designated box, container, or space used for material storage. A card is affixed to each bin to document material details such as receipts, issuances, and returns. The responsibility for maintaining Bin Cards lies with the store department.

Stock Control Cards: These cards also function as quantitative inventory records, managed by the store department for each material item. Essentially, they provide an overview of the overall inventory status within the store, including details on receipts, issuances, returns, current stock on hand, and pending orders.

Advantages and Disadvantages of Bin Cards:

Advantages: 
(i) Reduced likelihood of errors, as entries are made concurrently with the receipt or issuance of goods by the individuals directly handling the materials.
(ii) Enhanced stock control effectiveness, as real-time comparison of actual quantity on hand with the book balance is feasible.
(iii) Facilitation of material identification by referencing the Bin Card to the corresponding bin or storage receptacle.

Disadvantages: 
(i) Dispersed store records, covering a wide area.
(ii) Prone to smearing with dirt and grease due to proximity to materials and regular handling.
(iii) Individuals handling materials may not be well-suited for the clerical tasks associated with maintaining Bin Cards.

Advantages and drawbacks of Stock Control Cards:

Advantages:
(i) Information is organized in a more condensed format, making it easier to refer to.
(ii) The records can be maintained in an orderly manner by individuals dedicated solely to clerical tasks, allowing for a clear division between workers responsible for record-keeping and those handling materials.
(iii) Centralized record-keeping enables a comprehensive understanding of the overall stock position without the need to physically inspect the entire storage area.

Disadvantages:
(i) Immediate comparison of the physical stock of an item with its book balance is not facilitated.
(ii) Identifying materials in stock may be less straightforward compared to bin cards, as Stock Control Cards are typically stored in cabinets or trays.

Stores Ledger: The Stores Ledger serves to document both the quantity and cost of materials received, issued, and currently in stock. As a subsidiary ledger connected to the primary cost ledger, it is overseen by the Cost/Accounts Department. Goods received notes and Materials requisition notes are the source documents used for ledger entries. While the first two documents primarily record quantities received, issued, and in balance, the third document, i.e., the Stores Ledger, also tracks the value of receipts, issues, and closing balances. Typically, the storekeeper in the store department manages records of quantities through Bin cards and Store Control Cards, while the cost accounting department maintains records encompassing both quantity and value.

Difference between Bin Card & Stores Ledger